Abstract
This paper states utilizing the capital asset pricing model (CAPM) in corporate risk management. It is widely recognized that CAPM is a helpful tool in the financial field, providing a method to calculate the expected return of an investment based on systemic risk. This essay mainly describes the importance of the relationship between risk and return and learning how to balance them so enterprises can make informed decisions. Through a series of literature and case studies, this article will show how organizations can effectively use CAPM to identify potential risks, assess costs, and determine appropriate risk adjustments to realize the maximum returns. In addition, the limitations of CAPM will be discussed, including its assumptions about market efficiency and investor rationality, which may not be applicable in all cases. At the same time, this paper puts forward a systematic investment analysis method by applying CAPM to corporate risk management, which improves the investment decision-making process. Therefore, the essay mainly explains the knowledge about the CAPM model and its application in corporate finance.
Published Version
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